• BTC’s exchange reserve at the time of writing was 36% lower than the 2020 peaks.
• Growing institutional adoption could erode liquid supply further.

Bitcoin’s [BTC] liquid supply has been sinking to new depths, thanks to the strengthening ‘store of value’ narrative and expectations of a strong bull market in 2024.

Indeed, exchange supply has trended downwards in 2023 despite BTC prices more than doubling on a year-to-date (YTD) basis, as per AMBCrypto’s analysis of CryptoQuant’s data.

Moreover, BTC’s exchange reserve at the time of writing was 36% lower than the 2020 peaks.

Demand>> Supply

A CryptoQuant researcher argued that the continuing decline in exchange supply was the result of demand exceeding supply for Bitcoin. The analyst with the pseudonym ‘PAPI’ added,

“Higher emissions and less demand in the first decade saw supply rise. I consider 2018 the last “early” cycle. The cat was out of the bag in 2020>2021. Remember all the Superbowl ads? Since then, demand has outstripped supply, Bitcoin finally (truly) entered popular culture.”

This assertion was also reflected in greater utilization of the Bitcoin blockchain. The 30-day average of daily transactions lifted dramatically in 2023, a sign of growing mainstream adoption.

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Author: Aniket Verma

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